BILL REQ. #:  Z-0164.4 

Read first time 01/19/2005.   Referred to Committee on Natural Resources, Ocean & Recreation.

     AN ACT Relating to the department of natural resources' authority to create a single pilot mitigation bank on state-owned aquatic lands; reenacting and amending RCW 43.79A.040; and adding a new chapter to Title 79 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   (1) The legislature finds that the existing state and federal regulatory framework for wetland and aquatic resource mitigation is an important tool used to offset impacts to aquatic lands.
     (2) The legislature further finds that because impacts to wetlands and aquatic resources often affect state-owned aquatic lands, the department should work within established state and federal regulatory mitigation processes to develop a single pilot mitigation bank on state-owned aquatic lands.
     (3) The intent of this chapter is to establish the proprietary mechanisms for the department to develop, implement, and manage a single pilot mitigation bank on state-owned aquatic lands. Additional authority will be needed if the department seeks to establish more than one mitigation bank.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Compensatory mitigation" means the process of restoring, creating, enhancing, or, in exceptional circumstances, preserving wetlands, other aquatic resources, or uplands for the purposes of compensating for the unavoidable adverse environmental impacts of a project that remain after all appropriate and practicable avoidance and minimization has been achieved.
     (2) "Credit" means a unit of trade representing the increase in the ecological value of a site due to improvements made to the habitat conditions of the site, as measured by acreage, functions, or values, or by some other regulatory approved assessment method.
     (3) "Department" means the department of natural resources.
     (4) "Mitigation" means the sequential process of avoiding impacts, minimizing impacts, and compensating for the remaining unavoidable impacts of a project.
     (5) "Mitigation bank" means a site or sites where wetlands, aquatic resources, or uplands are restored, created, enhanced, or in exceptional circumstances, preserved expressly for the purpose of providing compensatory mitigation in advance of authorized project impacts to similar resources.
     (6) "Mitigation banking agreement" means a legal agreement between the department and a public or private entity under which the parties to the agreement agree to jointly develop, implement, and manage a single pilot mitigation bank that is located on state-owned aquatic lands and is approved through state or federal regulatory mitigation processes.
     (7) "Mitigation banking partners" means public or private entities with which the department has entered into a mitigation banking agreement under section 3 of this act.
     (8) "Project" means a physical construction project that develops or redevelops land in a way that results in unavoidable adverse environmental impacts that remain after all appropriate and practicable avoidance and minimization has been achieved.
     (9) "Site" means a mitigation bank site, or a site where compensatory mitigation has or will occur.

NEW SECTION.  Sec. 3   (1) The department may enter into mitigation banking agreements with public or private entities to develop, implement, and manage a single pilot mitigation bank that is located on state-owned aquatic lands and is approved through state or federal regulatory mitigation processes. A mitigation banking agreement must establish the business relationship between the department and its mitigation banking partner, clearly identifying the assets each entity will contribute to the pilot mitigation bank project. The agreement is not subject to the provisions of RCW 79.90.480 or 79.90.500.
     (2) The department and its mitigation banking partners must develop and adopt a management plan, for the pilot mitigation bank, that is approved through state or federal regulatory mitigation processes and, if applicable, by the city or county in which the aquatic lands are located. The department must work cooperatively with other applicable public agencies or private entities in the development of the management plan, or in the establishment of specifications for the plan. The department and its mitigation banking partners are responsible for expenses incurred in the development of the management plan. All management plans adopted under this section must include:
     (a) Details for the creation, restoration, enhancement, or preservation of the wetlands, other aquatic resources, or uplands on the pilot mitigation bank site;
     (b) Details of the long-term management actions that will occur on the site, when the actions will occur, and where those actions will occur within the site; and
     (c) Details on the amount of funding necessary for the long-term management endowment and details as to how the amount was calculated under section 4 of this act.
     (3) The service area for the pilot mitigation bank must be based on the geographic and functional connectivity of the pilot mitigation bank site with the impacting project sites, which must be determined and approved through state or federal regulatory mitigation processes.
     (4) Consistent with state and federal regulatory mitigation processes, state-owned aquatic lands utilized as the pilot mitigation bank will not be available for other uses that will change the intent of the site as a mitigation site or compromise the ecological functions of the site.
     (5)(a) The department may sell mitigation bank credits generated from the pilot mitigation bank and receive revenues from the sale of mitigation bank credits generated from the pilot mitigation bank that have been sold by its mitigation banking partners.
     (b) The department and its mitigation banking partners must determine the economic value of the mitigation bank credits for the pilot mitigation bank. The economic value of the mitigation bank credits will not be subject to the provisions of RCW 79.90.480 or 79.90.500. The department and its mitigation banking partners must sell the credits for no less than market value, as determined using appropriate mitigation credit market appraisal techniques. The economic value of the mitigation bank credits may include the costs associated with the habitat improvements made to the site and the value associated with the use of state-owned aquatic lands for the mitigation bank.
     (c) All moneys received by the department from the sale of mitigation bank credits generated from the pilot mitigation bank, in excess of a long-term management endowment created in section 4 of this act and in excess of the revenues to mitigation banking partners, must be deposited according to RCW 79.90.245 and 79.64.040, and paid to towns according to RCW 79.92.110.

NEW SECTION.  Sec. 4   (1) The department or its mitigation banking partners will create an endowment for the purpose of generating funds that are to be used for the long-term monitoring, maintenance, and management of the pilot mitigation bank.
     (2) The department or its mitigation banking partners will assume long-term management responsibility for the pilot mitigation bank after the amount of money necessary to establish the endowment that will adequately cover the costs of long-term monitoring, maintenance, and management is determined by the department, documented in the management plan, and approved through state or federal regulatory mitigation processes.
     (3) The amount of money necessary to establish the endowment must be based on the specific conditions of the pilot mitigation bank site and the long-term management plan for the site, as approved through state or federal regulatory mitigation processes.
     (4)(a) If the department assumes the long-term management responsibility for the pilot mitigation bank, the revenue from the sale of mitigation bank credits generated to establish the endowment must be deposited into the aquatic lands compensatory mitigation endowment account established in section 5 of this act.
     (b) The department must keep separate accounting records for moneys received into the aquatic lands compensatory mitigation endowment account from the sale of mitigation bank credits to ensure that funding for long-term management is fully secured and expended as approved through state or federal regulatory mitigation processes.

NEW SECTION.  Sec. 5   (1) The aquatic lands compensatory mitigation endowment account is created in the custody of the state treasurer. All receipts from moneys received by the department for the purpose of creating a long-term management endowment under section 4 of this act must be deposited into the account.
     (2) The moneys in the account must be invested for the benefit of the pilot mitigation bank site that the department has agreed to manage under this chapter.
     (3) The account must be administered by the state investment board. The principal of the account is irreducible. Disbursements from the account in an amount equal to the site management costs for the pilot mitigation bank, adjusted annually by the inflation rate, must be deposited into the aquatic lands compensatory mitigation management account, created in section 6 of this act, upon authorization of the commissioner of public lands and the director of the state investment board, provided the principal of the compensatory mitigation endowment account is not reduced. Allocations to the state investment board expense account under RCW 43.33A.160 may also be made from this account.

NEW SECTION.  Sec. 6   (1) The aquatic lands compensatory mitigation management account is created in the custody of the state treasurer. The account will receive revenues from the aquatic lands compensatory mitigation endowment account as described in section 5 of this act.
     (2) The moneys in the account must be used solely by the department for the purpose of performing long-term monitoring, maintenance, and management of the pilot mitigation bank site that is located on state-owned aquatic lands. Only the commissioner of public lands or the commissioner's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.

NEW SECTION.  Sec. 7   The purchase and sale of mitigation bank credits, generated by the single pilot mitigation bank authorized in this chapter, are to be voluntarily agreed to by the department and public or private third-party entities that are required to fulfill regulatory compensatory mitigation obligations. Mitigation credits made available through the pilot mitigation bank should be one of several options for third parties to meet their regulatory compensatory mitigation obligations. The department may not require a third party to buy mitigation credits from the pilot mitigation bank as a condition to use state-owned aquatic lands. If a third party agrees through the regulatory mitigation process to purchase credits from the pilot mitigation bank to fulfill its compensatory mitigation obligations for impacts to state-owned aquatic lands, the third party must complete the purchase prior to the department issuing a use authorization for the impacting project.

NEW SECTION.  Sec. 8   Nothing in this chapter affects the authority of the department to exchange, sell, or transfer jurisdiction of state-owned tidelands and shorelands or accept gifts of aquatic lands under RCW 79.90.457, 79.90.580, or 79.90.475 except that state-owned aquatic lands used for the pilot mitigation bank will not be transferred out of state ownership and control.

NEW SECTION.  Sec. 9   By December 31, 2010, the department must provide a report to the appropriate committees of the senate and house of representatives that provides the status of the pilot mitigation bank in regards to regulatory certification, management plan development, service area determination, credit determination, valuation, and sale, and endowment fund creation and expenditure.

Sec. 10   RCW 43.79A.040 and 2004 c 246 s 8 and 2004 c 58 s 10 are each reenacted and amended to read as follows:
     (1) Money in the treasurer's trust fund may be deposited, invested, and reinvested by the state treasurer in accordance with RCW 43.84.080 in the same manner and to the same extent as if the money were in the state treasury.
     (2) All income received from investment of the treasurer's trust fund shall be set aside in an account in the treasury trust fund to be known as the investment income account.
     (3) The investment income account may be utilized for the payment of purchased banking services on behalf of treasurer's trust funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasurer or affected state agencies. The investment income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments shall occur prior to distribution of earnings set forth in subsection (4) of this section.
     (4)(a) Monthly, the state treasurer shall distribute the earnings credited to the investment income account to the state general fund except under (b) and (c) of this subsection.
     (b) The following accounts and funds shall receive their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The Washington promise scholarship account, the college savings program account, the Washington advanced college tuition payment program account, the agricultural local fund, the American Indian scholarship endowment fund, the students with dependents grant account, the basic health plan self-insurance reserve account, the contract harvesting revolving account, the Washington state combined fund drive account, the Washington international exchange scholarship endowment fund, the developmental disabilities endowment trust fund, the energy account, the fair fund, the fruit and vegetable inspection account, the future teachers conditional scholarship account, the game farm alternative account, the grain inspection revolving fund, the juvenile accountability incentive account, the law enforcement officers' and fire fighters' plan 2 expense fund, the local tourism promotion account, the produce railcar pool account, the rural rehabilitation account, the stadium and exhibition center account, the youth athletic facility account, the self-insurance revolving fund, the sulfur dioxide abatement account, the children's trust fund, the Washington horse racing commission Washington bred owners' bonus fund account, the Washington horse racing commission class C purse fund account, ((and)) the Washington horse racing commission operating account (earnings from the Washington horse racing commission operating account must be credited to the Washington horse racing commission class C purse fund account), the aquatic lands compensatory mitigation endowment account, and the aquatic lands compensatory mitigation management account. However, the earnings to be distributed shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.
     (c) The following accounts and funds shall receive eighty percent of their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The advanced right of way revolving fund, the advanced environmental mitigation revolving account, the city and county advance right-of-way revolving fund, the federal narcotics asset forfeitures account, the high occupancy vehicle account, the local rail service assistance account, and the miscellaneous transportation programs account.
     (5) In conformance with Article II, section 37 of the state Constitution, no trust accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

NEW SECTION.  Sec. 11   Sections 1 through 9 of this act constitute a new chapter in Title 79 RCW.